November MCUEs: CU membership, loan growth remain healthy

January 9, 2019

Credit union membership growth is on pace to grow near 4.5% this year, according to CUNA’s latest Monthly Credit Union Estimates, the fastest pace of growth in four decades. However, credit union membership and loan growth softened in November, falling to 0.19% and 0.60%, respectively from 0.24% and 0.70% in October.

“Rising interest rates likely contributed to the weakened growth. Nevertheless, the year-over-year credit union membership and loan growth rates are still a very healthy 4.43% and 9.35%,” said Samira Salem, CUNA senior economist.

In November, adjustable rate mortgage growth declined significantly from 4.5% to 0.71% while fixed rate mortgages rebounded, growing 0.40% as compared to -2.33% in October.

“It’s not surprising that adjustable rate mortgage loans are not as attractive to consumers in an increasing interest rate environment. Home Equity Lines of Credit (HELOCs) also proved to be less attractive in November, registering growth of 0.76% as compared to 2.44% last month,” Salem said. “Members appear to be more price sensitive with HELOC rate increases, possibly putting off big ticket item purchases, home remodels, or finding other ways to manage their cash flow.

“The rebound in fixed rate mortgages is interesting but might be nothing more than buyers trying to beat the expected December rate hike by the Federal Reserve. The Fed did increase interest rates in December, as anticipated by most economists,” she added.

CUNA economists expect modestly higher rates over the next year which will contribute to a continued weaker housing market in the new year. 

Credit union savings balances were up 1.48% in November, largely driven by strong growth in share drafts, which were up 6.15%. Share drafts are on pace to growth 8.55% this year, which is lower than the 9.5% growth in 2017.

Certificates of deposit and regular shares also grew in November, albeit at a slower pace of 1.48% and 0.64%, respectively. In contrast, growth of IRAs fell to -0.30%.

“The interest rate on new and used auto loans continued to increase this month. Over the past 12 months, interest rates for autos have steadily increased from 3.08% to 3.69% for new autos and from 3.76% to 4.30% for used autos. In addition, projected that auto sales in the U.S. fell 1.3% in November,” Salem said. “Despite the interest rate increase and weakening auto market, total auto loans at credit unions increased 0.42% in November, just slightly lower than the 0.51% increase in October. Credit union auto loans remain on pace for very robust annual growth of 10.64%.”

The increase in savings balances and softening loan growth over the month generated a slightly decreased loan-to-share ratio of 85.17%, down from 85.91% last month.

CUNA economists expect the Fed to make two 25-basis point rate hikes next year, which should slow loan growth and bump savings balances growth rates up.